Wood Group completes £2.2bn takeover of Amec Foster Wheeler

Wood Group, the Aberdeen-based oil and gas services company, has completed its takeover of Amec Foster Wheeler, the engineering contractor with a particular strength in the nuclear sector.

Robin Watson, the chief executive of Wood Group, said the deal created “a global leader in the delivery of project, engineering and technical services to energy and industrial markets”.

One of Wood Group’s reasons for the deal was to reduce its exposure to the upstream oil industry, which has fallen by 25% in both 2015 and 2016. Watson said: “We expect to deliver significant cost synergies in a less cyclical business.”

In particular, it has been looking to break into the environment and infrastructure markets, according to an interview that Mr Watson gave to the Financial Times.

Wood Group – which today changes its name to just Wood – has revenues of around $11bn and employs around 55,000 people in 60 countries. Following the $2.2bn takeover it will reduce the oil side of its business to around 55%. Amec has a similar footprint, with 40,000 personnel in more than 55 countries.

One regulatory requirement of the deal was that Amec dispose of its oil and gas assets. It has now sold these to Australian engineer Worley Parsons for £182m.

The united company will also operate across chemicals, renewables, nuclear, infrastructure and mining. The deal was unanimously accepted by both boards in March. It values Amec at £5.64 per share, which is a 15.3% premium to its price at that time.

Amec shareholders will receive 0.75 of new Wood Group share for each share held, giving them about 44% of the share capital of the combined group.

One of the particular attractions of Amec is its nuclear arm, which offers a range of decommissioning services to the UK’s Nuclear Decommissioning Authority, and is also involved in the development of small modular reactors and is managing a number of research projects for the UK government, such as the Digital Reactor Design scheme.

A risk of the deal is that Amec is the subject of a Serious Fraud Office probe into alleged bribery and corruption at Monaco-based oil company Unaoil, along with US engineer KBR and the Swiss–Swedish technology company ABB.

Image: Amec is an important supplier for the UK’s Sellafield nuclear complex (Amec Foster Wheeler)